A number of employees that we come across do not seem to know the meaning of payment in lieu of notice. What does it mean? It means that your employer is paying you upfront so you do not have to work out your notice period. So, for instance, if you have a 3 months’ notice period in your employment contract, your employer would pay you three months salary in lieu of notice. If you have a two month notice period in your contract of employment, your employer will pay you two months salary in lieu of notice.
In some cases, employees have received a year’s salary in lieu of notice. As always, this salary will be subject to the appropriate deductions of tax and National Insurance contributions (based upon the salary rates current at the time of notice).